Cobalt REIT II Closes, Raises $410M Equity

DALLAS-In a fast-paced campaign, Cobalt Capital Partners has closed out a second fund after raising $410 million of equity in less than nine months from institutional investment circles. Cobalt Industrial REIT II is packing more than $1 billion of purchasing power, with leverage.

"We're very pleased with the relatively quick timeframe," says Lewis D. Friedland, managing partner of Dallas-based Cobalt Capital. The second equity raise got under way in January when the $225-million Cobalt Industrial REIT I was fully invested after a two-year buying spree that ended with 12.6 million sf in nine major metros.

Friedland explains the second fund is slightly different from the first, building in a development component for small-bay industrial space in the US. "Our goal is to be the capital partner of choice in this product type," he says. And, he tells GlobeSt.com that there already are ground-up projects in the pipeline in Atlanta, Houston and Chicago.

REIT II, like the first fund, targets light-industrial, multi-tenant buildings with 250,000 sf or less, low percentages of office finish-outs and infill locations in major markets. To date, the second round of equity has bed down four million sf in Atlanta, Chicago, Dallas, Houston, Orlando and Phoenix. In the past three weeks, deeds have rolled for one-offs and small portfolios in Dallas, Houston and Atlanta. And before the year ends, Friedland says he expects to pick up four million sf to five million sf of additional space in its target markets. "We have a very active pipeline," he says.

Regardless of the fund, Cobalt's buildings average 90,000 sf, all built since the 1970s. The largest concentrations are located in Atlanta, Chicago, Dallas, Southern New Jersey and Philadelphia. "The most important thing is the infill location and having buildings that don't become obsolete," Friedland says, adding 60% of the tenant base is international and national companies, all needing smaller spaces. "Even though our tenants have smaller spaces, they are not small companies," he stresses.

Cobalt Industrial REIT II will have a fund life of five to 10 years, but Friedland projects the equity will be fully invested in the next 2.5 to three years. San Antonio-based USAA Real Estate Co. is Cobalt's partner and an investor in both funds. REIT II's seed money came from US pension funds, insurance companies and many repeat investors from the first fund.

"It went so well because we had a number of existing investors," Friedland points out. "That's an indicator that the institutions like our strategy of buying buildings that we can actively manage to increase their NOI and values over time."